Question

a)You purchase a 3-year US government bond with a face value of €1,000 and semi-annual coupon payments amounting to €25. The bond will still make six coupon payments plus pay back the principal. If the semi-annual yield to maturity is currently 5%, the present value of this bond would be?

b) Computer stocks currently provide an expected rate of return of 16%. MBI, a large computer company, will pay a year-end dividend of €2 per share. If the stock is selling at €50 per share, what must be the market’s expectation of the growth rate of MBI dividends?

c)Consider a 5-year bond with a 10% coupon that has a present yield to maturity of 8%. If interest rates remain constant, one year from now the price of this bond will be

Answer #1

a. The price of the bond can be found using PV function in EXCEL

=PV(rate,nper,pmt,fv,type)

Here the payments are semi-annual

rate=5%

pmt=coupon payment=25

nper=6 (coupn payments remaining)

fv=1000

=PV(5%,6,25,1000,0)=873.11

The price of the bond=873.11

b. As per the dividend discount model,

growth rate=expected return-(Dividend/Stock price)=16%-(2/50)=16%-4%=12%

c. The formula is same PV function

=PV(rate,nper,pmt,fv,type)

rate=8%

nper=5-1=4

pmt=coupon payment=(10%*1000)=100

fv=1000

=PV(8%,4,100,1000,0)=1066.24

The price after one year=1066.24

What is the value of a 5-year, 8.0% coupon rate, $1,000 face
value bond with semi-annual coupon payments, if similar bonds (same
maturity, same risk profile) are trading at a yield to maturity of
6.25%?

17.
Assume a semi-annual coupon bond matures in 3 years, has a
face value of $1,000, a current market price of $989, and a 5
percent coupon. Which one of the following statements is correct
concerning this bond?
A.
The current coupon rate is greater than 5 percent.
B.
The bond is a money market instrument.
C.
The bond will pay less annual interest now than when it was
originally issued.
D.
The current yield exceeds the coupon rate.
E....

You purchased a $1,000 par value 20-year 4% coupon bond
with semi-annual payments for $1,000. Immediately after the
purchase, interest rates increased and the yield to maturity and
coupon reinvestment rate increased to 6%. (the coupons themselves
stayed at 4%) Interest rates and the yield to maturity remain at 6%
and you sell the bond 5 years later, having reinvested the coupons
at 6%. How much is in your account (proceeds from bond sale and
value of all coupons after...

You own a 10-year, 5% semi-annual coupon bond with $100 face
value. If its yield to maturity is 5.3%, what percentage of its
value comes from coupon payments?

A semi-annual bond has a face value of $1,000, a coupon rate of
7.2%, a yield to maturity of 5.5% and has 5 years remaining to
maturity. What is the price of the bond?

16. A 10-year bond, $100 face value bond with a 8% coupon rate
and semi-annual coupons has a yield maturity of 5%. The bond should
be trading at a price of $.___ Round to the nearest cent.
17. XYZ company has just issued a 30-year bond with a coupon
rate of %7.5 (annual coupon payments) and a face value of $1,00. If
the yield to maturity is 11%, what is the price of the bond. Round
to the nearest cent....

a 10-year bond, $1,000 face value bond with a 8% coupon rate and
semi-annual coupons has a yield to maturity of 12%. the bond should
be trading at the price of? round to nearest cent

An semi-annual coupon bond with a $2,000 face value matures in 4
years. The bond currently sells for $1627.412 and has a 12 percent
yield to maturity. What is the bond’s nominal coupon rate?

1. Analyze the 20-year, 8% coupon rate (Semi-annual payment),
$1,000 par value bond. The bond currently sells for $1,218. What's
the bond's yield to maturity?
A. 5.06%
B. 5.68%
C. 5.38%
D. 6.10%
2. Analyze the 20-year, 8% coupon rate (Semi-annual payment),
$1,000 par value bond. The bond currently sells for $1,218. What's
the bond's current yield, and capital gain yield? (Please show your
work)
A. 6.57%, -0.47%
B. 6.07%, -0.69%
C. 6.57%, -0.47%
D. 6.07%, 0.69%

PART 2 - BOND CALCULATIONS
a) What is the price of a $1,000 par value, semi-annual coupon
bond with 16 years to maturity, a coupon rate of 5.40% and a
yield-to-maturity of 5.90%?
b) What is the price of a $1,000 par value, 10 year, annual
coupon bond with a 5.80% coupon rate and a yield to maturity of
5.50%
c) A 10-year, 6.30% semi-annual coupon bond today and the
current market rate of return is 5.60%. The bond is...

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